REGULAR CORPORATION CLOSE CORPORATION

Number of May exceed 20 Stock of all classes shall be

shareholders held of record by persons
not more than 20
Who exercises Board of Directors Board of Directors
corporate powers But the Articles of
Incorporation may provide
that the business of the
corporation shall be
managed by the
stockholders of the
corporation
Holding of board Requirements for a valid Actions taken by the
meetings meeting: directors without a proper
 Existence of a call or due notice of a
previous notice, and meeting are deemed valid,
such notice must be given the following:
in the form required  Before or after the
by the bylaws, sent action is taken, all the
within the period fixed directors give their
in the bylaws and sent written consent
by the proper officer  All the stockholders
authorized have actual or implied
 Must be called by the knowledge of such
proper person, who is action
usually stated in the  Directors are
bylaws accustomed to take
 Held at the informal action with
appropriate address express or implied
 Held at the stated acquiescence of the
date and appointed stockholders
time, or at a  All of the directors
reasonable time have express or
thereafter implied knowledge of
 For a decision to be the action and none
implemented, there is make an objection in
quorum and voting writing
requirements present
Matter of pre-emptive The shareholders’ right to Pre-emptive right shall
right subscribe to all issues or extend to all stock to be
dispositions of shares, of issued, including reissuance
any class in proportion to his of treasury shares, whether
present stockholdings, the for money, property, or
purpose being to enable the personal services, or in

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shareholder to retain his payment of corporate debts.
proportionate control in the Unless, the articles of
corporation and to retain incorporation provide
equity in the surplus otherwise.

The following are instances

pre-emptive right is not
available:
 Shares to be issued
to comply with laws
requiring stock
offering of minimum
stock ownership by
the public
 Shares issued in
good faith with
approval of the
stockholders
representing 2/3 of
the outstanding
capital stock in
exchange for property
needed for corporate
purposes
 Shares issued in
good faith with
approval of the
stockholders
representing 2/3 of
the outstanding
capital stock issued in
payment of previously
contracted debts
 In case the right is
denied in the Articles
of Incorporation
 Waiver of the right by
the stockholder
 If the shares of a
corporation are
offered and not
subscribed and
purchased by the
stockholders, and the
shares are being
offered again, there is

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 no pre-emptive right
with respect to the
latter offer of shares
Matter of appraisal The right to withdraw from Deadlock
right the corporation and demand  Exercised by the
payment of the fair value of corporation
his shares after dissenting  Only used in a
from certain corporate acts deadlock situation
involving fundamental  Can be directed
changes in corporate against the
structure. corporation or any
other stockholder
This is available under the  Available even
following: without unrestricted
 Extension or retained earnings and
shortening of not subject to any
corporate term formula
 In case any
amendment to the Withdrawal “put back”
articles of  Exercised by the
incorporation has the stockholder
effect of changing or  May be used for any
restricting the rights of reason
any stockholders or  Available only against
class of shares, or of the corporation
authorizing  Limited only in a
preferences in any situation when the
respect superior to corporation has
those of outstanding sufficient assets in its
shares of any class books
 Investing of corporate
funds for any purpose
other than the primary
purpose
 Sell or dispose all or
substantially all
assets of the
corporation
 Merger or
consolidation
Whether the YES. NO.
corporation can list in
the stock exchange However, there must be It may not list in any stock
compliance with the exchange or make any
requirements set by the public offering of its stocks of
Commission. any class.

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Liabilities General Rule:
(Who are generally Corporation is liable for its
liable for corporate corporate acts, on the
acts?) grounds of its separate and
distinct legal personality.
Unless: Directors, trustees,
or officers do the following:
 Willfully and
knowingly vote for
patently unlawful acts
 Are guilty of gross
negligence or bad
faith
 Are guilty of conflict of
interest
 Consent to the
issuance of watered
down stocks
 Agree to hold
themselves personally
and solidarily liable
 Are to be held liable
by express provision
of law
SEC involvement NO.
(May the SEC
interfere?) It cannot interfere with the
management of the
corporation’s affairs. This is
in line with the business
judgment rule.
General Rule:
Corporation is liable for its
corporate acts, on the
grounds of its separate and
distinct legal personality.
However, Stockholders
actively involved in the
management of the
corporation may be held
liable in the same manner as
directors are liable.
YES.
It may interfere with the
affairs of the corporation if
the directors or stockholders
are so divided with
management of the business
that the required votes for
corporation actions cannot
be obtained, resulting in the
lack of appropriate conduct
of the business to the
advantage of the
stockholders, generally.